Here’s the truth: business crises happen.
They’re always unexpected, usually require a lot of extra man hours and cups of coffee to remedy, and are never fun. But if you handle them correctly, they can make your business stronger in the long run. Just ask companies like Disney and Starbucks.
In this article, we’ll explain what a business crisis is, seven potential crises your brand could face, and three crisis management tips to get you through unscathed.
What’s a Business Crisis?
Simply put, a business crisis is any event, or series of events, that disrupts an organization’s standard operating procedures in a seriously negative way.
There are different kinds of business crises, which we’ll discuss in this article. But all of them have three common characteristics: they come as a surprise, they pose an imminent threat to an organization, and they must be dealt with in a timely manner.
Let’s pretend you own an ecommerce store. If your servers suddenly crashed and you weren’t able to sell products to customers for 24 hours, resulting in thousands of dollars in lost revenue, you’d have what’s known as a technological crisis on your hands.
More on the potential business crises your company could face in the next section.
7 Potential Business Crises
Not every business crisis is the same, nor should every crisis be handled the same way. Let’s discuss seven potential crises your business could face in the future, as well as proven ways to overcome them as quickly and effectively as possible:
1. Financial Crisis
As the name suggests, a financial crisis involves money. Specifically, financial crises occur when a company can no longer pay its debts. This kind of crisis is usually caused by a sudden lack of interest in the products or services a company offers.
For example, Delta Airlines saw a dramatic drop in revenue after the 9/11 attacks. People stopped booking flights and Delta had to file for bankruptcy in 2005.
How to Handle This Crisis: First, you must reallocate company funds to cover short-term costs. This will give you breathing room. Then you need to analyze your revenue streams and find new ways to generate income and/or reduce costs.
2. Organizational Crisis
Organizational crises occur when companies intentionally wrong or mislead their customers. This can play out in three distinct ways:
- Deception: A company knowingly lies about and/or tampers with public-facing information such as details about one of their products or services.
- Misconduct: A company intentionally engages in illegal activities, usually with the end goal of bettering its financial position.
- Skewed Values: A company prioritizes short-term economic success over social progress, investors, customer experience, and employees.
How to Handle This Crisis: To successfully deal with an organizational crisis, you must change your company’s culture. Why? Because, generally speaking, these crises are caused by a flagrant disregard for customers. By creating a company culture that values and invests in customer success, you’ll avoid many of these types of crises.
When working to change the culture of your organization, start in the hiring phase. Only bring in new team members who align with your company’s values.
3. Technological Crisis
Most modern businesses rely on some form of technology to operate. Because of this, technological crises—a crisis that occurs because of a technological malfunction—are an ever-present threat that your company needs to be aware of and guard against.
Tech companies experience technological crises on a regular basis, it seems. Within three months of each other (December 2020 to March 2021) both Google and Facebook properties experienced outages and were unavailable to customers for short periods of time.
How to Handle This Crisis: First things first, solve the issue! Identify what’s causing your technology to malfunction and remove the problem immediately.
When you’re back up and running, you must do two things simultaneously: investigate why the tech breakdown occurred so that you can guard against it in the future and prepare your customer support team to handle the flood of angry messages directed at your company.
Finally, depending on the nature of your technological crisis, consider releasing a public statement acknowledging the problem and apologizing for any inconvenience it caused.
4. Workplace Violence Crisis
Workplace violence crises happen when current or former employees act violently in the workplace. One of the worst examples of this kind of crisis happened in 2017.
A San Francisco-based UPS driver brought a gun to work and opened fire on his colleagues. Tragically, he killed three people and injured five others before shooting himself. A definite motive was never established, though it’s believed the attacker felt disrespected.
How to Handle This Crisis: Workplace violence crises are often the worst kind because people’s lives could be at stake. If your business ever faces this crisis, do your best to de-escalate situations before they turn deadly. At the same time, alert local authorities as quickly as possible and call for immediate medical attention if anyone is hurt.
5. Personal Crisis
A personal crisis can occur when any individual who is associated with an organization—a management professional, low-level employee, company advisor, etc.—is caught doing something illegal and/or unethical.
These misdeeds don’t need to be work-based either. A CEO involved in a scandalous affair, for example, can lead to serious backlash against the company he or she leads.
Unfortunately, there are plenty of examples of personal crises we could point out. Probably the most notable is Harvey Weistein, whose deplorable acts were exposed in 2017, effectively ending his career and launching the #MeToo movement.
How to Handle This Crisis: Because personal crises encompass a wide range of different scenarios, each must be handled individually. But in all circumstances, investigate the scope of the misconduct, determine discipline, and issue a written and/or verbal statement.
It’s always better to be honest and transparent in these situations. If word gets out that your company tried to cover up the illegal or unethical deeds of those associated with it, the backlash you’ll face will be even more severe.
6. Natural Crisis
What if an earthquake hits your state and causes extensive damage? Or a tornado rips through your city? Or a contagious virus spreads throughout the land? These may seem like Hollywood-esque scenarios, but they do happen from time to time.
In 2005, Hurricane Katrina caused 125 billion dollars in damage, much of it in New Orleans, LA. If you owned a business in the Big Easy at that time, your day-to-day routine was definitely affected. More recently, COVID-19 swept through the entire world, forcing many businesses to close down and/or institute remote work policies.
How to Handle This Crisis: The best defense against natural crises is preparedness. Get proactive and make sure your office has a solid evacuation plan, work from home procedures, and data backups in place so that your business doesn’t come to a screeching halt.
7. Crisis of Malevolence
Crises of malevolence happen when one company tries to sabotage another in illegal ways. These acts go way beyond traditional competition and become criminal.
For example, hacking into another company’s data records, stealing their secrets, spreading nasty, untrue rumors about them, and, in extreme cases, kidnapping key company personnel all fall under the “Crisis of Malevolence” umbrella.
How to Handle This Crisis: If your employees and/or customers are in danger because of a crisis of malevolence, your first job is to ensure their safety. Once that’s accomplished, deal with the crisis head-on, whether by closing security breaches, recalling products, or by doing anything else required. Next, use the legal system to apprehend your attackers.
Crisis Management Tips
Business crises are oftentimes unavoidable. If your company stays in business long enough, chances are it will encounter one of the seven crises above. Here are a few crisis management tips to help get you through these dark days:
Build a Crisis Management Team
Start by assembling a team of choice individuals within your organization to help lead your company through crises. Ideally, these individuals will work in different departments (we suggest finance, legal, and PR employees to start) and come from varied backgrounds.
Once assembled, ask your crisis management team to develop a plan that adheres to brand values. For instance, ask them to list the various crises your company could face, then create action steps to solve them, while holding fast to organizational principles.
Properly Train Your Employees
Next, train your employees to not only identify potential problems that could evolve into crises, but how to deal with them when they arise. This is really important!
Additionally, make sure your staff is comfortable reporting issues when they see them. If they believe they’ll get in trouble for recognizing and calling out problems, they probably won’t and your company will pay the price. Early identification is key to effective crisis management.
Commit to Timely Communication
Finally, make sure you communicate quickly and clearly when business crises appear.
First, communicate with internal stakeholders to acknowledge the problem(s) you face and develop solutions. Then communicate your plans to external stakeholders. Lastly, if necessary, communicate the problem, your plans (if appropriate), and your results to the general public. Your brand’s reputation might depend on it.
Note: your crisis management team should develop a communication strategy as well. That way your company is always on the same page and can act as one, unified group.
Protect Your Business
Business crises happen. Your job is to be proactive so that when they arise, you can head them off before they completely derail your brand. The information shared in this article will help you. Now it’s time to implement it. Good luck!